EP 262 – The Hoosier Hot Shot Note Investor Gene Chandler

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NCS 262 | Hot Shot Note Investor

NCS 262 | Hot Shot Note Investor

Gene has done a great job of putting together a solid note business plan that has allowed him to focus on his notes business and step away from his full time job. From a hot shot driver, he turned into a hot shot note investor and has successfully turned his note investing his hobby into his full-time income. Gene’s focus is on vacant and non-vacant single family homes, following a business model of waiting a little longer to do a little better. He shares how he made multiple six figures for the past six years by taking it slow instead of doing the work fast like everyone else. He also looks into stuff that not many people would look at, such as double wides, and that like everything else, you need to work hard because it isn’t a get rich quick work, but it will make you rich. Learn from the expert on how you, too, can become a hot shot note investor.

We’re excited to have our good buddy, Gene Chandler, be the guest on this episode. Gene has been an active note investor for over six years now, and he doesn’t give us as much credit as he should. He has done a tremendous job over the six years of recovering, like many Americans did from the downfall in 2008, 2009, and 2010, where Gene just about lost everything, like many other people. Gene has done a great job of putting together a solid note business plan that has allowed him to focus on his note business and to step away from his full time job as a hot shot driver throughout the state of Indiana. It’s not saying he doesn’t still do that from time to time, but Gene has done a tremendous job of honing in on his target audience, his hot zone, in the Indiana market around where he lives, plus or minus two hours. He’s done a great job of buying two to three assets per month, to really feed his note business and bring in money. Gene likes to say this is not a get rich quick scheme, it’s to get rich over the long term. Gene is working that game plan to perfection along with doing some other amazing things as a note investor. We’re excited to have our note family friend, Gene Chandler on this episode.

Listen to the podcast here:

The Hoosier Hot Shot Note Investor Gene Chandler

We have our good friend and very good note investor, the man, the myth, the Indiana hot shot legend, Gene Chandler. How are you doing?

Hi. I’m just hanging in there.

First of all, Gene has been an active note investor for quite a while now. How many years?

About six now. I dabbled with it for a while.

You’ve transitioned where you’re almost completely full-time now. Your job that you had before is more of a hobby thing that you do on the side though. You have done a tremendous job of turning a hobby into your income, and then your work taking a back step, being more so your hobby. Why don’t you share to people where you’re from, what your focus is, and your business model is?

I’m from Elkhart, Indiana, and that’s the northern part of the state, right in the middle. My business model is basically single family homes, vacant and occupied. It all depends on the area. I buy vacant in some areas and other areas where you can buy a vacant or you can turn it over quick, I don’t. I’m not interested in that. At first, I used to be interested in those, and now I’ve transitioned out and thinking I can wait a little longer and do a little better if I go and be patient. With the occupied, there’s got to be something that takes a little longer to do. I’ve had them for as much as 30 months before they finally got everything rolling, that I did very well. The last one I ended up with $64,000 and I had $11,500 in it in 30 months. If you’re looking at stuff like that, if you really look at your numbers, you can be patient. Working it out with the borrowers and talking to them, I try hard to project being nice and kind to the borrowers so that we can work some stuff out if possible. If not, to see what we can do to help them out of a situation.

NCS 262 | Hot Shot Note Investor

Hot Shot Note Investor: I try hard to project being nice and kind to the borrowers so that we can work some stuff out if possible.

There was a young lady that just did one. It was too much for her. She had bought a CFD. She had enough money to make the payments and the tax and the insurance, but she didn’t have enough money to fix it if it broke. Things just kept happening and she thought, “It’s better for me to just bail.” She bailed. I had found somebody else right away that were interested in buying it. She was already gone and she had been gone since last September, so it’s been awhile. I got in contact with her, and I offered her $200 to sign off on the land contract. She said, “That sounds like a fair deal,” but she was a little iffy. She wasn’t sure if she wanted to trust me, which is common if you’re dealing with the customer. I was able to get everything signed, notarized, and gave her the $200, and thanked her. You could tell that she had a little bit of grief there. People go through stuff like that. You got to be sensitive to that, and then be kind as best you can. She thanked me back so I can only assume that I did okay. Then I resold it. I bought it for $8,200. It was a double-wide.

Not too many people do double-wides. I look at stuff like that. It depends on the area and the land. I figured for $8,200 I could pop that double-wide off and drag it away, and the land is worth more than that. I was excited about this one, but I didn’t want to rebuild it. The garage roof had caved in. It was bad. The house needed a lot of work. I put the normal sign up in the window, “I have found his place vacant. If anybody vandalizes, contact this person. I’m not renting it, but I will sell it.” Three days later, bang. I was in and out of this in five weeks. I bought it for $8200 and I sold it for $20,000. It just happened. There’s stuff like that.

You were very cautious. Your full time profession was a hot shot driver all throughout Indiana and other areas. Let’s not forget restoring old cars too. That was all over Indiana. In other parts, you drive by a lot of your assets. You actually prefer to ride by most of your assets.

A couple of times I’ve had realtors go. They’re wanting to get that listing. They’re wanting you to take the property all the way up to where it’s easy for them to sell. You’re going to make some money, they’re going to make some money, but you’ve got to balance out the weather. You buy it low and you put $30,000 in it, so you got $40,000 in it and you could have sold it for $20,000. You bought it for $8,000, you could have sold it for $20,000 and made $12,000. You put all this extra money in it and you still want to get an extra $12,000 or $14,000 after the realtors see it. I can’t justify that stuff.

I see that a lot in our own industry. I’m talking to people or they’ll call me up, and they’ll ask them some different questions like, “I don’t know. I think you ought to bail.”“We’re going to rebuild this and we’re going to have something. The realtor has guaranteed us that the market’s going to be here when it’s all done.”They find out that they’ve got to sell it for $10,000 less. They could have just turned the money from a C-market to a B or an A market, and they could’ve done a little bit better with it. I see a lot of that. I get phone calls from people that are asking about different things. I get cornered occasionally about doing multifamily and different commercial stuff and do I see it. Yes, I do. Do I buy it? No, because right now I’m focusing in on single family, vacant and occupied. I’m choosy on both of those. If you’re looking at an occupied property and then you do a search on the borrower and he’s a dirt bag and he’s moved 57 times, that’s not occupied, that’s vacant. It just hadn’t happened yet. You’re not going to re-do that. You’re not going to be able to sell that contract. That guy has been in and out of jail, and so that’s not necessarily a good occupied property. Who knows what the guy’s going to do before he gets out of there?

On seconds, you need to look at your borrower. You need to find out a bit about them. If you’ve got borrowers that don’t move, they’ve been at this job or in this area for a long time and they’re just struggling with their payments, the chances are they’re going to catch back up, especially this time of year. Specifically this time of year, people are going to get their tax returns. They’re going to be able to bail it back out. I bought three and I’ve already been called by our borrower and he said, “This happened, but how about I pay you $1,000 a week?” He’s a truck driver so he makes good money.

It’s a rental, and I figured that out. I’m thinking the guy’s living over here, so you can look at it like that too. It’s occupied but is it owner-occupied? This guy called up. He’s got seven other properties. He wants to keep his property. He has some stuff happening. He said, “I’ll pay you $1,000 a month until I get caught up. I got my tax returns coming back.” I said, “Sure. I don’t have any reason to not do that.” To me that was a cha-ching, and this guy is going to be right back on the program.

What did you pay for that note? Is it contract for deed, first lien or non-performing note?

It is $36,000 and I paid $11,000. He’s going to end up paying about $4,000 into that right away. I’m going to be into this for zip. He’s still in it for the $35,000 because he hasn’t been able to make payments for a while. It catches up to him real quick. Can I discount his loan? Yes, probably. Am I going to? Probably not, not for $35,000. The house is actually worth close to $50,000 right now, so he’s got some room. It’s like, “Let’s just get you back on the road.”

Usually, you’re just buying in Indiana. Now you’ve expanded your market. What are the states that you’re buying in now?

Ohio, Michigan, and Illinois. I got spanked really good in Cook County. I lost $78.50. I hate it when I lose money. I would have paid somebody $700 to get out of that deal.

You stick just to Indiana. You started buying notes and you would modify where you keep people in the property or evict if it was a vacant property. If it was vacant property, then you turn around and try to flip it fast. You talked about when you put a sign in the window and sold it in three days. What are you doing on your quick flips? Are you wholesaling it? Are you reaching out to local real estate investment clubs? Are you posting on Craigslist? What are you doing?

I’m not posting on Craigslist because I haven’t had to, but real estate clubs, I’ve got wholesalers now. Can I go in and re-do them? Yes. I’m trying to buy an emerging market. That’s the other thing. I do like county. A lot of people don’t like the county, but I like the county. I’m talking about rural area in mainly lower Michigan and Indiana, because I know where the jobs are at. Northern Indiana, this is huge manufacturing. If you live in my area and you don’t have a job, there’s nothing I can do for you. This is good job. We’ve got forklift drivers making $50 an hour. This is serious money up here, and the cost of living isn’t insane either. These guys can make some good money in this area. With all that, these little rural areas that have spots of houses, was a bedroom community. If you can pinpoint those and have twenty-minute or half an hour drive for them to go to a job, then it’s a touchdown. People like the county. They don’t mind the half an hour, twenty-minute, 40-minute drive to work every day. I did it for many years. We don’t have the traffic here that other places do. We don’t have the horrible backup like some of the people in California.

NCS 262 | Hot Shot Note Investor

Hot Shot Note Investor: It’s not get rich quick, but it is get rich.

You mentioned how you have people starting to reach out to you now, investors and all that. At the first part, when we first met, raising capital was a bit of a mind block for you. Would you agree with that?

It still is. I went out and I’ve got enough history. I wanted to get some history anyway. I talk to a lot of people, and it’s being around a lot and just going to the events. People walk up and introduce themselves and see what I’ve got to offer. I’ve been able to not go out and punch at it, but gain investors out of the fact that I’m turning some numbers. We do a small deal with them. I don’t like to do the little $10,000 deals unless I know it’s safe. I like to do the little bit more expensive deals. I’ve had guys walk up and they offer me $50,000 and we’ll do a $50,000 deal and end up selling it for $80,000 in a four-month period of time. That’s good money. I’ve been able to turn some numbers in, and then they offer me more money after that. Right now I’m still building my investor base. I’m looking with another person that is another investor to do a fund. We’re going to try to be in B and A properties. Are there many of those out there? No, but if you needed to do, you can do less and you’ve got a better pool of assets when you’re all said and done.

You talked about turning some numbers. Are you buying 500 assets in a year or 100 assets in a year?

I’m doing about three a month. My average has been about three a month right now. That keeps you busy. There’s a lot to them. A lot of times, you can take an asset and it runs through smooth. You start having bumps with two or three of them in a row. You got your hands full, because you’ve got attorneys, you’ve got servicers, you’ve got borrowers, you got the figures in front of you, and sometimes the sellers. I had two situations where the seller gave me documents that didn’t even have the right names on them. Inc., LLC, or number five trust or number four trust makes a big difference, because you got to start with this is what you’re buying and this is what it says on the deed. What it says on the deed is what has got to say on the assignments in the allonges and contract and everything else. If there’s a separation there, you need to find out why and how you can get your paperwork back up. Some of the contracts for deeds have been hairy. You got to work through that.

Are you doing your own workouts or are you outsourcing your workouts?

Both. If they call me, I talk to them. I can understand that some of the people have been hesitant to do that. I try to be calm. I tell them that I’m acting as a debt collector and ask them if it’s okay for me to record the phone conversation. They always say yes, which is nice, and I record the phone conversation. I’ve got an app on my phone. When you call me, I just record it without you knowing it, and then I got that to slip it in later on. “Remember this?”

Would you say you’ve made multiple six figures in the six years you’ve done this?

Yeah.

Would you say you’re averaging or getting close to averaging over six figures per year?

Yeah, this year.

That’s what I want people to realize. This is not a get rich quick business.

No, it’s not get rich quick, but it is get rich. That’s one of the things to start and to work at it. I’ve worked at it slow. A lot of people thought I should work at it a lot faster. Some of the other people that have been in a situation where I am at where you lose everything, I lost everything in 2008, 2009, and 2010, that was tough. Psychologically it’s tough, emotionally it’s tough. It’s really rough. You’re going to be double cautious, because you didn’t see that one coming. I’ve been through a lot of downturns, but nothing like that.

I’ve been quite cautious and I trusted, but verified, the information that I’ve learned over the years. I got with other people and developed friendships. There was a place where I realized that I’ve got a lot of knowledge. I understand a lot. People were asking me questions and I’m able to answer them with some history. I thought I probably have to step up and start pushing harder. That’s where I’m at. I’ve been that way for a few months just taking those steps, but it takes a little while. I wanted to have more knowledge. I knew what I wanted to buy, what I didn’t want to buy, and a lot of people will buy. I’ve seen this and I’m thinking, “They just bought five assets, and they have no idea that that is a dragon.” Some of the stuff that they bought, I’m thinking, “Really? How many other ones have you bought?” “This is our first five.” “I’m glad you’ve got good people around you.” A lot of them are on your sites. You’ve got people talking back and forth and asking good questions and receiving some good answers. Your sites have been good for a lot of these newbies. If they’ll just settle down and listen, they’ll do well.

NCS 262 | Hot Shot Note Investor

Hot Shot Note Investor: If they’ll just settle down and listen, they’ll do well.

You talked about networking and going out to events. How important is attending events or being part of a mastermind helped you out?

It was really important, because I found investors too. People need to put their money someplace. It’s still as true today as it was five years ago. They want to make their money make money. It’s astounding that people have these IRAs that they don’t do anything with. I’ve got CDs that make 1% or 0.5% a year, and they want to make more. Part of why they’re not doing anything is because they had a downturn also. What are you going to do for them that is secured better than what the normal investment that they can get to on the stock market? It’s your knowledge compared to their knowledge. Some of these guys, even though they’re on your mastermind, they want to have a feel of it but they don’t want to know it. They don’t want to know the business, but they want to know if they can make money in that business. They went to your mastermind, they’re sitting there with coinage, and they want to know in that room who can they trust to make some investments with? I’ve got a YouTube channel now.

I try to do interviews with different people that are pertinent to our business. I’ve done two with insurance companies, and it is really good information, because those are some of the questions that you’re going to have in insurance. When do I buy it? Who do I buy it from? Why do I buy it? If I pay for it now and I sell a property in a month, can I get my money back? If something happens, will they pay? That’s the other thing. There will be a few insurance companies in the industry and some of them won’t pay. It’s just difficult. You got it boiled down to who pays and who answers customers’ questions. It’s the same thing with attorneys.

I went through a number of different attorneys. Some you sync with, and some you don’t. It’s okay. If you don’t like working with a guy because you don’t like his personality, work with somebody else. Let him finish the job if you feel it’s good and you can handle it, but if you just don’t like this guy at all, find somebody else and move on. Again, your site and masterminds help all of that stuff because you can get a lot of leads. There are a lot of leads. It’s well worth the money just because of the lead.

That’s the beautiful thing I love about when we have our mastermind events. People come there to learn. They also come there to network and meet people. They are coming to invest and to find people and joint venture partners or funding people, people find deals that they can fund and they split on. You bought some assets. Your model has changed a little bit because you’re a fix and flipper for the most part for a while. We’ve bought some stuff that you’ve flipped. Now you’ve gone to cashflow. You don’t mind having stuff hanging around for 12, 24, to 30 months because they’re paying on time. What happened with the ones that drag out? Do they get refinanced out? Do they sell the house off? Do you sell that note off? What’s been your exit strategy for that longer term play?

I just let it sit and make me mailbox money. It’s for sale. I’m trying to build my capital and turn it over. If I bought it at 35%, 45%, 50%, and I can turn it over for 80%, after I’ve taken payments, which ends up being a good yield after you let it sit. This is get rich, but it’s not get rich quick. Patience is a lot. Long-term, you’re going to have to look at a lot of stuff. If you want out of it before you sell it, when you’re making $300 a month, and you bought it for 7,000, it’s not unreasonable to think that. “I can’t do that with the deals that I’m looking at.” Then look at some other deals.

We got a question here. “Where do you source your products generally? Not specifically, but where are you sourcing your deals?”

Private sellers and hedge funds. I haven’t been able to break any banks. I’ve considered, and I’ve actually even talked to attorneys about it, to get a license in Kentucky. I can buy directly from the banks in Kentucky, because you can’t do that because of state law in Kentucky, they got more assets available. That’s another reason why we’re trying to put that fun together. I can walk in and just deal with the bank directly. Right now the banks, they’ll take them to REO and sell them, because the market’s now recovered for the most part and they can get their money back out of it. Some of the banks are still struggling that they’ve made some bad moves. You can buy their pool. I have been able to put enough together to be able to do that with a bank.

Your market has grown enough that you see enough on the list that you’re pulling from hedge funds and private sellers. I’m willing to bet you’re doing some of the workouts, and then the other ones that get more difficult you throw that to your servicers or your attorneys to handle. The question that people are probably going to ask is what are you going to say? Aren’t you intimidated when people call you? Has Indiana have any weird laws for stuff like that?

I don’t do Gary, but there’s a huge market over there. I’ve just now got to the point where I’m thinking I’ve got a number of different sellers that are, “We’ve got a lot of Gary property. Can you at least go look at them?” I’m like, “Yeah,” so I’m going to take a couple of days and driver around Gary. It’s about an hour and a half away from me.

It’s changed a lot since the three years ago that you and I were on that road show down there with Mark Gold. I walked around the corner and talked about the home owner and got shot at.

The house we’re looking at ended up being back on FCI for $1,000.

Basically for three days, Gene and I and about twelve other people and staff drove around Indiana and parts of Chicago area looking at assets. We had a good time. You educated me on this that when you have a tax sale in Indiana, it’s a different rule as far as collecting the tax over to another states. You want to talk about the difference in Indiana about that?

I don’t know the difference because I only know Indiana. Do you want to talk about the overages?

Yeah, there are tax overages that it’s not always the first lien holder that can claim it. It’s the first person that comes to claim it. Is that correct?

Yes. The homeowner can go back and get it. The homeowner can’t bid at the tax sale, let alone do that, but they can go back and claim the overage. What you’ve got to do is what we call put a brick on it. As the lender, you’re going to inform the judicial system that there is a mortgage on it. The mortgager has first right. If they don’t claim it, if they screw up and don’t claim it, and the borrower comes in and says, “I want this overage,” they’re toast. You got to jump on that. You’ve got to jump on it, you got to be on it, and you will get notified. If you went down and file all your assignments, you’re going to get notified. You can’t just say, “I didn’t know,” because yes you did.

Is there a timeframe to let the courts know about that tax overage situation, that you’re the lien holder on that?

I don’t know. I do it right away. I don’t know what other people do. I think there’s a three-month window. The court’s going to look at everything. Within that window of time, you need to get your stuff submitted. I don’t trust that window all together, because I haven’t had to deal with it. I’m right on it. The day after, I’m putting a brick on that thing.

Usually within the first week, you’ve got to go if you are going to use a tax foreclosure to help you with the construct of foreclosure. I know I’ve done that in some states before where we are like, “ We’re just going to bid up the tax foreclosure to clean out and leave a title.” I did that just recently in a Houston asset. I know it’s going to go to tax foreclosure to go a lot more than what I’ve owed on it or what the taxes are owed on it, and it just makes more sense.

I’ve had somebody move into the house illegally three times after we’ve evicted them three times. It’s not a fun time. That’s one thing about Indiana. It’s a bit different than most. It’s that the homeowner can go claim it quickly. The judge or the court system in most states will send out notes and hold onto it for twelve months before we can claim it.

A second mortgage company can go after it too, so you got to be out there. You got to prove to them that you’re in first position.

NCS 262 | Hot Shot Note Investor

Hot Shot Note Investor: You’ve got to be out there. You’ve got to prove to them that you’re in first position.

It’s easy to prove with an affidavit and a copy of the assignments. It’s not hard to do. On Indiana, we had Jason Lucchesi on here. He fixes and flips. You with the note business there, when you go to evict, does Indiana have some faster eviction laws than other states?

They do. It’s quick. I haven’t had to do anything in Indiana for a long time, but it used to be 23 days plus the ten-day waiting period, so it’s fast. If you’ve got an attorney that’s on top of it, you can get stuff submitted quickly.

It definitely can be done in roughly fourteen days for the most part.

Maybe it’s changed, but you can do it quick.

If you had a deal that you enjoy, if you had your bread and butter deal, describe it. What’s your bread and butter deal look like? What do you get excited about and gets you out of bed in the morning?

The one that I just did, but that puppy, and knowing that I should be able to turn it over quick. I bought it for $8,200 and sold it for $20,000 in five weeks. The only reason why it took me five weeks is because I didn’t have time to get up there. Once I got my sign in the window, it was quick. I went up there prior to and reviewed the property, did the numbers on it, and then went back. I’ve actually done a few of those.

How far was that property with the double wide away from your house?

No, it’s about 45 minutes from here. It was in Michigan. I’m sure certain counties, but Michigan hadn’t been too bad to deal with.

Relatively fast foreclosures and values that are appreciating in Michigan for the most part. The nice thing about what you’ve got going too, is you don’t mind doing stuff out in the country and a little bit outside of town. Most people avoid those areas, but you’re buying primarily in that two, to two-and-a-half-hour radius around where you’re located, and there’s plenty of inventory there, right?

Yeah. I try to stay within 300 miles. That’s my little radius,150 out.

Three hundred square miles basically. Here in Texas, that still gets me to Houston or Dallas. I’m still not buying anything here. How many notes have you bought since you started six years ago? Do you have over 100 now?

I haven’t quite crested the hundred yet. I’ve only started buying three a month. I try to buy once a month last year, and I just couldn’t put it together for whatever reasons, so I bought half a dozen. This year I buy a three month, and it has been a give and take where I’ve been buying small tool, 25 maybe.

That number, whatever that number is, it’s replacing what you were making as a hot shot driver though, right?

Yeah. What I wanted to do is build it up to where we were replacing the income. My wife and I sat down and said, “This is what we need to replace the income,” because we like our lifestyle. Dan Zitofsky talks about lifestyle. It’s not necessarily making money, it’s making a lifestyle and making time.

Can people reach out to you if they’ve got any questions?

They can reach out to me. My website is ChandlerFin.com. My YouTube channel is Chandler Fin and my email address is Gene@ChandlerFin.com.

Thank you so much for joining us here on The Note Closers Show. It’s good to see you. You’re one side of the nation, I’m on the other side, or vice versa. I need to have you fly down here in Austin. You better get ass to Cape Coral. Trust me, it’ll be a lot warmer in Cape Coral than it will be up in Indiana. If you have questions or may have a deal for Gene up around the Northern Indiana part of the state, he’s the man. He’s the man, the myth, the legend, the Indiana hotshot note legend, Gene Chandler. Gene, take care, and we’ll see you at the top.

God bless.

God bless you too. If you love what you’re hearing, make sure to leave a review. If you’re on Facebook, I’d love for you to share it. If you’re watching on YouTube or Vimeo, make sure to like it and/or share it as well. Once again, have a great day. Go out and make something happen. We’ll see you all at the top.

 

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About Gene Chandler

NCS 262 | Hot Shot Note InvestorGene has been investing in the Indiana and surrounding markets as a note investor for over six years and specializes in buying and finding nonperforming, single-family residential notes and contract for deeds.

 

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